Bench & Bar September/October 2026

Kentucky House of Representatives and Senate, but Governor Andy Beshear vetoed several of its provisions. When the General Assembly returned after a break but prior to adjourning for this Session, the HB 757 veto was overridden by the House and the Senate, again, overwhelmingly. HB 757 carries an effective date of January 1, 2027. HB 757, as initially passed, contained the following language: “It is the purpose and intent of the General Assembly to levy taxes on persons engaged in the operations of a Prediction Market. It is not the intent of the General Assembly to legalize these activities.” But when the General Assem bly returned after its short break and again before it adjourned, it enacted HB 869, a sort of tax cleanup bill with a multitude of various tax-related provisions addressed therein. Kentucky’s prediction market tax was amended by HB 869, and the above quoted text as to purpose and intent was specifically stricken by the General Assem bly in HB 869. No public dialogue as to the reason has been located.

HB 869 revised the “firewall” approach by amending HB 904 to address contracts with entities offering sports events contracts or sports prediction markets and authorized administrative action by the KHRGC. Effec tively, the bill tightened enforcement and focused the restriction on sports-related prediction market contracts. PREDICTION MARKETS IN KENTUCKY MOVING FORWARD With roughly four months before its Jan uary 1, 2027, effective date, it will be quite interesting to see how the industry and other state and federal regulators react to this new frontier of taxation. Litigation has commenced, with lawsuits advancing var ious claims already filed by the industry, the Kentucky Attorney General, and the CFTC. A growing number of states have begun acting related to prediction mar kets, including Illinois, Tennessee, North Carolina, Michigan, Ohio, and New Jersey. Kentucky is at the forefront.

ABOUT THE AUTHORS

MARK F. SOMMER , ESQ. is a partner and the chair of the tax, benefits & estates

practice group at FBT Gibbons LLP. With nearly 40 years of experience, his practice focuses on state and local taxation, federal tax matters, tax controversy and litigation, and economic development incentives. He has represented more than 120 For tune 500 companies and has served as counsel in over 1,000 tax controversies across numerous jurisdictions. Sommer is a Fellow of the American College of Tax Counsel, a past chair of the ABA Tax Section’s State and Local Tax Committee, and has been recognized by Best Lawyers in America, Super Lawyers, and State Tax Notes for his contributions to the field. He is a frequent author and speaker on state and local tax issues.

ENDNOTES 1 Jasmine M. Cowen contributed to this article as a summer associate at FBT Gibbons LLP and is a stu dent at William & Mary Law School. Ms. Cowen is not a licensed attorney. 2 Commonwealth v. KalshiEX LLC , et al. , No. 26-CI-00689 (Ky. Cir. Ct. June 17, 2026); Commonwealth v. QCX LLC, et al. , No. 26-CI-00696 (Ky. Cir. Ct. June 17, 2026); Coalition for Fair Markets v. Com monwealth, et al. , No. 26-CI-00667 (Ky. Cir. Ct. June 12, 2026). 3 Murphy v. Nat’l Collegiate Athletic Ass’n , 584 U.S. 453, 454 (2018). 4 Aleksandra Dimitrova, How Much Money Do Americans Spend on Sports Betting, PlayersTime (Feb. 28, 2026) https://www.playerstime.com/reports/how-much-money-do-americans-spend-on sports-betting/. 5 Alexis Cubit, Kentucky Derby 2026 Payouts as Churchill Downs Sees Drops in Wagering, Courier Jour nal (May 3, 2026), https://www.courier-journal.com/story/sports/horses/kentucky-derby/2026/05/03/ golden-tempo-kentucky-derby-betting-payouts-run-for-the-roses-odds-churchill-downs-gambling records/89106648007/. 6 See Racing at Churchill Downs, Churchill Downs, https://www.churchilldowns.com/racing/ (last visit ed Aug. 14, 2026). 7 Complaint ¶ 39–40, Commonwealth of Kentucky v. QCX LLC, et al. , 26-CI-00696 (Ky. Cir. Ct. June 17, 2026); Sports Betting Tax Revenue Surges 382% as States Expand Legal Markets, Courier Journal (Dec. 10, 2025 at 02:23 PM EST), https://www.wkyt.com/2025/12/10/sports-betting-tax-revenue-surges-382 states-expand-legal-markets/; Eric Ramsey, US Sports Betting Revenue & Handle, Legal Sports Report (Mar. 27, 2026), https://www.legalsportsreport.com/sports-betting-states/revenue/. 8 Since Kentucky’s Tax was enacted, the states of North Carolina and Illinois have followed in taxing these contracts. 9 Ky. Rev. Stat. § 138.507(6).

TAYLOR E. ECLE BERRY is an associate

in the tax, benefits & estates practice group at FBT Gibbons LLP. Before joining the firm, she served as a law clerk in the U.S. Dis trict Court for the Eastern District of Kentucky. Ecleberry

earned her J.D., summa cum laude , from the University of Kentucky J. David Rosen berg College of Law, where she served as managing editor of the Kentucky Law Journal, and received her B.A. in politics from Washington & Lee University.

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